Wednesday, March 29, 2023

Coming to Grips With the Stages of Grief

By on April 14, 2016

The Puerto Rico Debt Monster took center stage once again, this time as the protagonist in a TV spot that made its debut on CNN after the airing and analysis of the results in Wisconsin’s Democratic and Republican primaries. The message in the spot, “No bailouts for Puerto Rico,” is a clear indication that there is enough money in a super PAC (political action committee) to scare the political will out of friend and foe alike.

No sooner had the spot aired, than U.S. Rep. Rob Bishop (R-Utah), the chairman of the House Committee on Natural Resources, who is sponsoring the Puerto Rico Oversight, Management & Economic Stability Act, or Promesa, filed this statement: “The claims in the ads are false. The purpose of the bill is to create a board to help fix the financial house in Puerto Rico without harming taxpayers. There will be no bailout, no bankruptcy, no Chapter 9. These issues were eliminated before we started working on a draft, therefore any reference to them now is a scare tactic. The House will never vote on a bill that sends taxpayer money to Puerto Rico to cover its debts. Puerto Rico is not a state and any program dealing with it, or any territory, will not impact, nor set precedents for states or municipalities. At the end of the day, we will have a good bill that helps Puerto Rico and protects all taxpayers.”

By the time this newspaper goes live on the web at the crack of dawn on April 14, the U.S. Congress will have seen Bishop file Promesa (the English acronym spells out the word “promise” in Spanish), as a perfunctory exercise in statecraft that will lead to some pro forma resolution, even if it is marked up in the House: “We tried, but it’s time to get on with an election campaign.” All signs lead to typical gridlock. Caribbean Business sources with knowledge of negotiations see creditors coming to the realization that Congress probably will not act on Puerto Rico’s behalf. Without a miraculous solution, creditors are coming to grips with the fact that the commonwealth will not be able to pay its first big payment on May 2.

The problem is that the commonwealth, despite measures—sales tax increases, income tax increases, petroleum tax increases—is broke. No more borrowing from Peter to pay Paul; se acabó.

It is eye-opening to hear lobbyists on Capitol Hill admitting that one of the hardest things in the world to do today is to get legislation through both chambers of Congress on any topic. Say they: “It is a very dysfunctional place,” before closing with “they are stuck with each other. It is going to take as long as it takes.”

One Caribbean Business source who has been on both sides of the restructuring game put it best when she said: “There’s this Kübler-Ross psychological model for mourning. First there’s denial, then anger, negotiation, depression and then acceptance. Every restructuring is somewhat like that. First there’s denial—‘this can’t be happening, these people are lying to me’; then they get angry, then they start negotiating with themselves and the other side over the reality that there is a loss that needs to be dealt with; then they get depressed that they are going to suffer loss; then they accept the loss. We are sort of in the negotiating phase.”

Observers might concur that the commonwealth and its creditors are in the negotiation stage—others may say it is outright depression. So, we negotiate and then the big question—how do we achieve sustainable economic development?

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